divergent eme responses to global and domestic monetary...

Divergent EME Responses to Global and Domestic Monetary Policy Shocks

Woon Gyu Choi Byongju Lee Taesu Kang Geun-Young Kim

The views expressed herein are those of the authors and do not necessarily reflect the official views of the Bank of Korea and IMF When reporting or citing this paper the authorsrsquo names should always be explicitly stated

Senior Economist IMF Institute E-mail wchoiimforg Economist Economic Research Institute The Bank of Korea Tel +82-2-759-5435 E-mail brianleebokorkr Senior Economist Research Department The Bank of Korea Tel +82-2-759-4208 E-mail tskangbokorkr Head Research Department The Bank of Korea Tel +82-2-759-5280 E-mail kgy3104bokorkr

This paper is a revision of a previous work titled ldquoUS Monetary Policy Normalization and EME Policy Mix from a Global Liquidity Perspectiverdquo The authors are grateful to participants of NBER East Asia Seminar on Economics in 2014 and the international conference on financial cycles system risk interconnectedness and policy options for resilience in 2016 for helpful comments

Contents

Ⅰ Introduction middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot1

Ⅱ Empirical Model middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot2

Ⅲ EME Responses to US and Domestic Monetary

Tightening middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot 5

Ⅳ Divergent EME Responses to US Monetary Policy Shocks

middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot12

Ⅴ Conclusions middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot21

References middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot22

Appendix middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot26


We assess the effect of tighter monetary policy in the US and emerging market economies (EMEs) on EMEs using a panel factor-augmented VAR model We find that a US policy rate hike outstrips an equivalent domestic rate hike in its impacts on EMEs In addition EMEs show divergent policy responses and their macro-financial responses differ depending upon their economic fundamentals in the face of tighter US policy In particular we find that high-inflation than low-inflation EMEs are more susceptible to the shock stemming from a US federal funds rate hike

Keywords Global liquidity Monetary transmission Divergent responses Panel factor-augmented VAR

JEL Classification F32 F42

1 BOK Working Paper No 2016-15

Ⅰ Introduction

The macroeconomic landscape of emerging market economies (EMEs) could

be shaped by global business cycles global liquidity cycles domestic business

cycles and domestic liquidity cycles This paper attempts to analyze the

influence of global and domestic liquidity cycles focusing on how US and

domestic policy rates affect macroeconomic outcomes and capital inflows in

EMEs

We analyze how growth and inflation in EMEs react to a US federal funds

rate hike Considering that the US policy rate had stayed at the zero lower

bound for a significant period after the Global Financial Crisis (GFC) we utilize

a factor model to measure the policy stance even with the policy rate at its zero

lower bound and derive three liquidity momenta associated with global

financial cycles The derivation and characteristics of these series are covered in

Choi Kang Kim and Lee (2014) which identifies the three global liquidity

momenta from a VAR with sign restrictions based on macro-financial variables

of advanced economies including the US federal funds rate and monetary

base We apply a factor-augmented vector autoregressive (FAVAR) model to

EME panel data

This approach allows US to control the other elements of global liquidity

cycles and idiosyncratic characteristics of each EME We look into the effects on

growth inflation capital inflows stock prices exchange rates current account

domestic policy rates and foreign reserves The empirical approach is also

employed to gauge the effects of domestic policy tightening in EMEs

Capital flows into EMEs are an important transmission channel of global

liquidity cycles as examined by Rey (2015) Broner Didier Erce and Schmulker

(2013) Alberola Erce and Serena (2016) Kim and Shin (2015) and Morgan

(2011) We analyze four components of capital inflows bond investments

equity investments foreign direct investments and other investments

The second part of this paper explores how divergent EMEsrsquo sensitivities to

global liquidity cycles are associated with their economic fundamentals

Previous studies have looked into differences in region industrial structure or

Divergent EME Responses to Global and Domestic Monetary Policy Shocks 2

exchange rate regime to figure out the source of divergent impacts We group

data points of the panel by the level of the relevant variables such as inflation

real GDP growth current account or foreign reserves Then we evaluate the

welfare loss of each group from US monetary tightening and determine the

fundamental that most strongly influences the welfare outcome in the event of

an external shock In addition we carry out a counterfactual exercise to

determine whether there exist any welfare gains if the EMEs with vulnerable

fundamentals took the domestic shock-absorbing structures of their relatively

robust counterparts

Our three key findings are as follows First a US interest rate hike outstrips

a domestic interest rate hike on its impacts on EMEs In particular a

one-percent increase of the federal funds rate reduces the GDP growth of EMEs

by a half percent cumulatively for three years while a one-percent increase in

the domestic policy rate of EMEs on average slows down their economies by

016 percent Second All components of capital inflows to EMEs shrink in

response to the US policy rate hike but only bond investments by foreigners

respond significantly to EMEsrsquo own policy rate hike Third high-inflation EMEs

are more susceptible than low-inflation EMEs in terms of growth and inflation

to tighter global liquidity High-inflation EMEs can achieve some welfare gains

if they adopt a domestic economic structure conducive to inflation stability

The rest of the paper is organized as follows Section Ⅱ presents the FAVAR

model used in this paper and Section Ⅲ illustrates the effects of US and

domestic monetary tightening Section Ⅳ investigates the sources of fragility of

EMEs and Section V concludes

Ⅱ Empirical Model

This section briefly explains the empirical model used in this study The

model is introduced in the companion paper Choi et al (2014) which offers

the characteristics of the model in detail We assume that there are three global

liquidity momenta ( ) namely policy-driven liquidity momentum market-driven


liquidity momentum and risk averseness momentum

The three global liquidity momenta are retrieved from financial data ( ) of

the G5 (the United States Germany France Japan and the United Kingdom)

using a factor model with sign restrictions For example policy-driven liquidity

momentum is set to increase the US monetary base The underlying financial

time series used in retrieving factors are policy rates domestic credit

international claims lending rate spreads government bond yields monetary

base real interest rates stock prices and stock volatility

(1)

The above equation shows that underlying data are explained by factors

and their idiosyncratic disturbances ( ) of which the covariance is

Factors are assumed to be exogenous to EMEs in explaining macroeconomic

and financial situation as expressed in (2) Note that the factors have

contemporaneous effects on EMEs

(2)

(3)

The macroeconomic and financial situation of an EME is described by

several variables in real GDP growth inflation in consumer price index

(CPI) current account balance stock prices nominal effective exchange rate

and capital inflows Two policy variables overnight call rates and foreign

reserves are also included The countries in the EME panel are Argentina

Brazil Bulgaria Chile Czech Republic Hungary India Indonesia Israel

Korea Malaysia Mexico Philippines Poland Romania Russia South Africa

Thailand and Turkey

The sample period runs from the second quarter of 1995 to the third

quarter of 2014 Real GDP CPI capital inflows foreign reserves and current

account are seasonally adjusted and the trend component of the overnight call


rate is removed by the Hodrick-Prescott filter Real GDP inflation exchange

rates and stock prices are measured in the quarter-over-quarter growth rate

and capital inflows current account and foreign reserves are measured as

percentages of the 5-year average of annualized nominal GDP Components of

capital inflows are processed in the same fashion as capital inflows The sample

period goes from the second quarter of 1995 to the third quarter of 2014 Two

lags are used for the endogenous variables and the contemporaneous factor

and one-period-lag factor are included in Equation (2) To recover the shock

process ( ) in global liquidity momenta an autoregressive structure with lag

order one in equation (2) and (3) is chosen on the basis of the Hannan and

Quinn (1979) information criterion

An increase in the US federal funds rate is applied in vector and this in

turn feeds into The accompanying changes in embark the dynamic

process of EMEsrsquo domestic economies which is expressed in equation (2) For

the first step we assume multivariate normality of and as follows

= prime

prime (4)

The conditional distribution given is also given by

~ primeprime primeprime prime (5)

Hence given the value of the expected shock is

primeprime (6)

While it is not unlikely that a change in the US policy rate would accompany

changes in the market-driven factor and risk averseness factor we concentrate

on the effect of the policy-driven factor extracted from global liquidity

Technically this approach entails measuring a change in the policy-driven

liquidity factor while the other two remain fixed Using the well-known formula

of conditional expectations under the assumption of multivariate normal

distribution we obtained the expected value of the policy-driven factor given


the other two factors

We consider two scenarios of adjustment in The first scenario supposes a

one-percentage-point hike in the federal funds rate and the second scenario

entails a one-percentage-point increase in the US real interest rate in addition

to the federal funds rate increase The second scenario reflects the slow

response of US inflation to monetary tightening as observed in Romer and

Romer (2004) and Christiano Eichenbaum and Evans (1999) The first scenario

brings about a shock tantamount to 58 percent of the standard deviation of the

policy-driven factor and the shock of the second scenario corresponds to 87

percent of the standard deviation We take the second scenario which

incorporates both the real interest rate rise and policy rate hike as the baseline

Since we drive factors from the financial and monetary data of five advanced

countries including the US any combination of changes in underlying variables

is at our disposal for scenario exercises We deliberately turn off concomitant

changes from other advanced countries in consideration of the growing

divergence in macroeconomic situations and corresponding monetary stances

among leading advanced countries We nonetheless keep the normal

transmission of US monetary policy to the US price level intact after the

GFC In particular we do not take into account any inflation pressures

stemming from structural drifts (for example perpetual shifts in productivity

growth and demography) that would ultimately alter real interest rates

Ⅲ EME Responses to US and Domestic Monetary Tightening

1 Reactions in growth inflation and policy

The immediate impact of global liquidity withdrawal is a reversal in net

capital flows which includes a suspension or reversal in capital inflows Our

finding in the first row of Figure 1 confirms this front line impact and

accompanying repercussions on exchange rates and stock prices As the supply

of liquidity from foreign sources shrinks in the domestic financial markets it


directly decreases aggregate demand as evidenced by weak output and sluggish

CPI inflation The weak GDP growth and low inflation we find here are in

contrast with earlier work by Canova (2005) in which Latin American countries

are found to experience an increase in GDP within a year after the shock and

immediate inflation He extracts the US macroeconomic and monetary shocks

from a VAR model and feeds them into a VAR model of individual Latin

American countries He rationalizes this outcome by means of simultaneous

increases of interest rates in Latin American countries which boost capital

inflows IMF (2013) is a recent study that analyzes the impact of the US

monetary shock on other countries Although its approach to measuring the

US policy shock on the output of other countries differs from ours in several

aspects such as the selection of shock-receiving countries (EME vs EME and AD

Figure 1 EME Responses to a US Federal Funds Rate Hike

Notes Above are shown EME responses in percentage points (up to 20 quarters) to a one-percent-point increase in the US federal funds rate and concomitant changes in the US real interest rate The shaded areas mark the confidence bands between 16 and 84 constructed by the Bayesian Monte Carlo integration method


countries) the measure of output (real GDP vs industrial production) and data

frequency (quarterly vs monthly) we find that its results are largely consistent

with ours

As shown in the third row of Figure 1 domestic authoritiesrsquo responses with

respect to their policy rates and foreign reserves are limited The response of

policy rates―about a 5 bps rise for a 1 percent hike in the US policy rate―is

lukewarm and weaker than what is seen in other studies such as Frankel et al

(2004) and Edwards (2010 2015) Frankel et al suggests a full transmission of

US interest rates to the rest of world especially to those countries under fixed

exchange rate regimes in the 1990s In a similar vein the following studies seek

to identify how much countries adjust interest rates in response to changes in

the US monetary policy stance Valente (2009) finds that discretionary policy

actions by the FOMC have smaller influences on interest rates in Hong Kong

and Singapore than policy changes based upon macroeconomic fundamentals

do Edwards (2010) finds rapid adjustments in Latin American countries but

slow adjustments in Asian countries to changes in the US monetary stance

arguing that such differential adjustments are attributable to capital mobility

Kim and Yang (2009) find that Asian countries under flexible regimes

significantly adjust their interest rates in response to US monetary policy

changes but their exchange rate responses are muted They attribute this

finding to fear of floating On the other hand Lubik and Schorfheide (2006)

based upon an estimated DSGE model report a limited transmission of US

monetary shocks to Europe We will revisit this issue when discussing

differentiation among EMEs

We use data beyond the GFC while most studies on monetary spillovers

focus on periods prior to the GFC when the US federal funds rate was not

constrained by its zero lower bound Two developments may have resulted in

the low contagion of monetary policy from the US to EMEs The foremost

cause is of course the federal funds rate at its zero lower bound Although the

US policy rate stayed at this level for seven years most EMEs reacted to the

waves of global liquidity stemming from the vigorous unconventional monetary

policy of the US Federal Reserve Second most existing studies on monetary


contagion take the US as the epicenter and largely abstract out the contribution

of other advanced countries while other advanced countries also have

contributed to the supply of GL The synchronization in the supply of global

liquidity among advanced countries that was witnessed prior to the GFC is at

odd with recent divergences in monetary policy among advanced economies

Our work takes a conservative position in that only the contribution of the US

in the supply of global liquidity is put into the exercise while the secondary

global liquidity generated from other advanced countries is turned off

A recent study by Edwards (2015) finds relatively strong spillovers of US

monetary policy to emerging markets in Asia and Latin America―33 to 74 bps

increases of policy rates in EMEs He uses data from the 2000-2008 period

during which US monetary tightening was more attributable to US inflation

rather than the global business cycle US policy after the GFC however seems

to have been concerned about the slow recoveries in domestic output and jobs

and the relatively fast recoveries in EMEs after the crisis may have loosened the

cross-border link of monetary stances between the US and emerging markets1)

Deacutees et al (2010) find moderate policy spillovers from the US to 33 sample

countries the median spillover is 2 bps against a US policy rate hike of 22 bps

The present empirical model also measures the effect of domestic policy

rates in EMEs The main difficulty in assessing the effect of domestic monetary

policy in EMEs is controlling for monetary and financial shocks from advanced

countries The three global liquidity momenta play the role of control variables

However we must accept that the empirical model lacks a link between EMEs

and global business cycles We employ recursive restrictions to identify the

domestic monetary shock placing variables in the following order CPI

inflation real GDP current account capital inflows foreign reserves overnight

call rates stock prices and nominal effective exchange rates We place

1) While Edwards (2015) deals with a long-run policy contagion from the US to some EMEs our study focuses on the dynamic responses of EMEs to global liquidity shocks driven by G5 monetary policy For this purpose we draw changes in the US policy rate controlling for US real GDP growth and inflation of producer prices Edwardsrsquo estimation focuses on the long-run contagion employing an error correction model while we estimate short-term spillover based upon the VAR approach


slow-moving real-sector variables ahead of variables reflecting financial flows

We assume that monetary policymakers in EMEs set their policy rates

responsively to innovations in real-sector and financial-flow data Finally we

allow asset prices and nominal effective exchange rates to react to domestic

monetary shocks We find that it is essential to have the aforementioned

sequence over the groups of variables―such as real sector financial flows policy

measures and asset prices―to obtain reasonable responses but that any change

in sequence within each group has little impact on the results

Figure 2 depicts impulse responses to a one-percent-point increase in the

domestic policy rate of EMEs along with the responses to the US policy rate

hike for comparison Domestic monetary tightening calls for initially moderate

Figure 2 EME Responses to a Domestic Policy Rate Hike

Notes The figure shows EME responses in percentage points to a one-percent-point increase in the domestic policy rate along with those responses shown in Figure 1 for comparison The shaded areas mark the bands between 16 and 84 constructed by the Bayesian Monte Carlo integration method


capital inflows which are followed by a lagged reversal and domestic currency

appreciations in two quarters with lower inflation and current account surplus

Stock prices drop initially but quickly rebound Output growth inflation and

current account at their peaks have much smaller responses to the domestic

policy rate hike than to the US policy rate hike

Although output growth and current account show similar response patterns

across the two exercises inflation exhibits different responses Domestic policy

tightening brings about a sluggish reaction in prices consistent with earlier

findings on the effect of US monetary shocks on inflation such as Romer and

Romer (2004) and Christiano Eichenbaum and Evans (1999) whereas US

policy tightening entails an immediate fall in inflation in EMEs These

contrasting reactions may be attributable to different patterns in pricing In the

face of global liquidity tightening importers can more readily adjust their

prices taking into account strategic responses of their domestic competitors and

foreign suppliers owing to lower global demand In contrast domestic liquidity

tightening leads to declines in domestic demand exerting downward pressures

on local prices Another explanation is that global liquidity tightening may

exert downward pressures on energy and commodity prices which are heavily

influenced by global demand and largely priced in US dollars whereas

domestic liquidity tightening affects the domestic prices of items with local

currency pricing

The responses of EME output growth and inflation are largely consistent

with findings from estimated New Keynesian open economy models such as

Adolfson et al (2007 and 2008) except for the timing of responses in output

growth and inflation In our study output immediately declines upon the

domestic as well as US monetary tightening but inflation reacts slowly to the

domestic monetary shock Our finding that output growth responses precede

inflation responses is similar to the major studies based on US data (for

example Christiano et al 1999 2005)

EMEs are found to absorb a part of incoming investments in their foreign

reserves after domestic monetary tightening This policy move is likely to limit

the effect of the policy rate lift to some degree by curbing domestic currency


appreciation Policymakers may choose this course of intervention to moderate

the impacts of hot money flows on inflation in part through sterilized

intervention which results in foreign reserve accumulation and dampened

responses in exchange rates Alberola et al (2014) in their panel analysis find

foreign reserves in EMEs have stabilizing effects on capital inflows during

global financial turmoil reporting a significant cross term of the EMBI+ spread

and international reserves that moderates the first-order effect of the spread in

reducing capital inflows to EMEs

2 Effects on components of capital flows

The previous section finds that global liquidity shrinkage causes overall

outflows of foreign investments from EMEs The IMF categorizes capital flows

into portfolio investments direct investments and other investments Portfolio

investments are divided further into bond investments and equity investments

Using IMF data we look into whether the withdrawal of global liquidity has

diverse effects across different categories of capital inflows to EMEs

In response to tighter US monetary policy all the categories of capital

inflows show different degrees of substantively weakened inflows (see dotted

lines in Figure 32) The most significant change in capital flows takes place in

foreignersrsquo investments in domestic bonds Equity inflows are only marginally

affected by the change in GL Direct investments by foreigners increase initially

but soon reverse to significantly negative figures

The solid lines of Figure 3 depict how a domestic policy rate hike affects

foreignersrsquo investments in EMEs Tighter domestic policy on average has

smaller impacts on capital flows than US tighter policy does and its impacts

are significant only for bond inflows This finding suggests that adjusting policy

rates in EMEs to handle capital flows could largely be ineffective

2) Broner et al (2013) examine the impacts of banking currency and debt crises on capital flow components They find declines in capital inflows during crises across all the components for upper-middle-income and lower-middle-income countries



1 Do EME responses depend on economic fundamentals

In the previous section we have found that the withdrawal of global liquidity

causes changes in output growth and inflation in EMEs The welfare

consequences of this development may be different across countries and we

now look into what factors are behind this divergence There are a number of

welfare approximations in terms of key macroeconomic variables basically

extending the approximation for a closed economy proposed by Woodford

(2003) These approximations are usually called loss functions which are

Figure 3 EME Responses of Capital Inflows to Global and Domestic Monetary Policy Shocks

Notes Above are shown capital inflows as a percent of GDP to EMEs (up to 20 quarters) after a one-percent-point increase in the US federal funds rate (dotted line) and an increase in the domestic policy rate of the same magnitude (solid line) The shaded areas mark the bands between 16 and 84 for the domestic policy rate increase constructed by the Bayesian Monte Carlo integration method


deemed as objective functions of policy authorities For an open economy

Corsetti et al (2010) derive approximations that apply to two-country models

with various sets of economic structure A standard approximation for a closed

economy comprises the output gap and inflation The approximations for an

open economy could be augmented with additional terms such as inflation of

imports terms of trade deviations from the law of one price or deviations from

exchange rates under perfect risk sharing depending on assumptions about

economic structure regarding financial market completeness and import price

setting We consider four variables to measure the welfare consequences of

global liquidity withdrawal real GDP growth CPI inflation exchange rate

changes and capital inflows We include capital inflows in light of escalating

concerns about capital flows in open economies and the necessity for capital

flow management to gain monetary independence notably as in Farhi and

Werning (2014) We measure the deviation of each variable from the steady

state for a three-year period3)

We employ a grouping approach similar to Lustig and Verdelhan (2007)4)

An alternative method to investigate the link between country characteristics

and certain statistical outcomes is regressing the outcomes on country

characteristics as in Miniane et al (2007) A typical approach is running

country-level VARs with limited lags and variables obtaining statistical

outcomes such as impulse responses and finally regressing the outcomes on

the variables of country characteristics This approach however has three

drawbacks (ⅰ) observation inaccuracy owing to limited degrees of freedom

(ⅱ) sample uncertainty in the second-stage regression owing to treating the

outcome from the first-stage analysis as a direct observation5) and (ⅲ) evolving

3) This method of measuring deviation for a single variable differs somewhat from the typical measurement of the loss function but retains information on the direction of responses and facilitates comparison with other studies

4) Lustig and Verdelhan (2007) form portfolios from government bonds of sample countries such that each portfolio includes a group of government bonds with similar levels of interest rate and bonds are dynamically assigned to each portfolio Thus the government bonds of a single country may belong to different portfolios over time The behavior of low- or high-yield currencies can be directly analyzed through portfolios

5) Miniane et al (2007) mitigates the second issue by re-sampling the outcome from the distribution derived from the first-stage VAR


country characteristics over time The grouping method we use is free of all of

the above issues

We divide 19 EMEs per period into four groups according to their

characteristics prior to the period For example we split 19 EMEs into four

groups for the first quarter of 2001 according to their average CPI inflation

during the period from 1998 to 2000 We do the same partitioning exercise

with respect to other fundamentals such as output growth exchange rate

growth current account balance foreign reserve ratio stock price growth and

capital flow ratio Among the four groups for each indicator the first group has

Figure 4 EME Fundamentals and Welfare-relevant Measures after US Monetary Tightening

Notes Points in each panel depict the relationship between a measure of fundamentals and a measure of the loss function In each panel the x-axis stands for the 3-year average of a fundamental variable and the y-axis for the 3-year accumulation of the impulse response after US monetary tightening All figures are in percentage points and real GDP growth (RGDP) CPI inflation (CPI) stock price increase (SP) and nominal exchange rate change (NEER) are presented on a quarter-over-quarter basis and not at an annualized rate Bars above and below dots mark the bands between 16 and 84


the countries with the lowest values in the indicator We form a panel from each

group and apply the panel FAVAR model finally measuring a loss function

value for each group against the global liquidity shock Figure 4 reports the

most informative combinations among the exercises and Figures A1 and A2

have the exhaustive sets from the exercise

We find that CPI inflation has discernable welfare consequences with respect

to real growth CPI inflation and exchange rates from the first column of Figure

4 Countries that experienced high inflation for the previous three years are

likely to experience more drastic output loss higher inflation and larger

depreciation than their moderately inflationary counterparts The most

inflationary group will experience a severe real depreciation in the event of

global liquidity withdrawal while the least inflationary group will experience

moderate real appreciation due to the deflationary effect of liquidity loss and

stable exchange rates against the shock

The real GDP growth rates of EMEs in our samples are more evenly

distributed than CPI inflation as observed by the horizontal distance of points

in the first and second column of the figure A similar pattern of effects on real

exchange rates is observed in groups partitioned by real growth rates Countries

that have grown faster than other EMEs experience a larger degree of real

depreciation as shown in the second column of the figure The loss of growth

due to US monetary tightening is least severe for the group with the second

highest growth performance prior to the arrival of the shock The nonlinear

pattern shown here may suggest that extremely high growth in an emerging

market country may build up vulnerability to external risk

The third column of the figure pertains to capital inflow responses to tighter

US monetary policy Countries that experienced larger capital inflows

significant gains in stock values and relative strengthening of their currencies

prior to the shock are prone to see capital inflow reductions after the shock

Using country-panel regressions Broner et al (2013) find evidence of

retrenchment in capital inflows during a three-year period following a

country-specific shock in lower- and upper-middle-income countries Our

finding here suggests that retrenchment in capital inflows after a US interest


rate hike depends on the magnitude of inflows prior to the shock6)

We do not find a clear dependence of capital flow responses to tighter US

monetary policy on the level of foreign reserves (see Figure A2 in Appendix)

Alberola et al (2014) find that the magnitude of decrease in capital inflows into

EMEs due to global financial stress (measured by the EMBI+ spread) is low for

countries with moderate foreign reserves (as fractions of international liabilities)

and high for countries with low or high foreign reserves Policy authorities can

build up foreign reserves to temper the countryrsquos vulnerability to sudden stops

in capital flows Provided that the level of foreign reserves is partially effective

in curbing sudden stops in capital flows the non-linear pattern as in the

aforementioned study is not necessarily inconsistent with the lack of a clear link

between foreign reserves and reduced capital inflows due to US policy

tightening

2 Does the level of inflation matter in transmitting policy shocks

This subsection explores divergent EME responses stemming from

cross-border diversity in inflation and their welfare implications Since the level

of CPI inflation offers a clear demarcation of macroeconomic management

among EME countries we divide 19 EMEs into two groups high-inflation and

low-inflation groups7) The high-inflation group has seen a 14 percentage point

increase per annum in their price levels during the sample period while

low-inflation group has experienced only 4 percent inflation on average

Figure 5 shows that high-inflation countries are more susceptible to a

6) The previous inflows of foreign capital are found to affect the magnitude of foreign investment reversal in response to a US interest rate hike but to have little impacts on growth and inflation This finding is odd with the concern that financial openness may be related to external vulnerability There are two possible explanations on the matter First financial openness is an endogenous outcome of an economy rather than exogenously determined institutions In an economy that is capable of manage capital inflows while gaining the benefit of them policymakers are more likely to initiate or accelerate the process of financial liberation Second our measure is about the flows of capital rather than stock and the financial openness of a certain country is better proxied by stock of inbound investments

7) The high-inflation group comprises Argentina India Hungary Mexico Indonesia Russia Romania Bulgaria and Turkey The low-inflation group includes the rest of the sample countries except for Brazil which is at the mid-point among EMEs in terms of CPI inflation


one-percentage-point hike in the US federal funds rate in terms of capital

flows and policy rates and consequently foreign reserves output growth and

inflation The welfare consequences are in part affected by domestic policy

responses especially changes in policy rates High-inflation EMEs raise their

policy rates in response to tighter US monetary policy in an effort to retain

capital inflows or prevent capital outflows consistent with the argument for

policy spillovers Interestingly the low-inflation EMEs lower their policy rates

after an initial rise which is possibly conducive to shoring up stock prices and

boosting aggregate demand Despite positive responses in domestic policy

rates capital inflows are unfavorable for the high-inflation group

Figure 5 Responses of High-inflation and Low-inflation EME Groups to the US Federal Funds Rate Hike

Notes The figure summarizes the responses of two EME groups after a one-percent-point increase of the US federal funds rate using a panel FAVAR model for each group The unit of the y-axis is percentage points The shaded areas mark the confidence bands between 16 and 84 for the low-inflation group constructed by the Bayesian Monte Carlo integration method


In terms of output growth and inflation low-inflation EMEs absorb the

shock with a lesser swing than high-inflation EMEs as summarized in Table 1

Exchange rates and stock prices exhibit little quantitative differences The real

depreciation of the high-inflation group exceeds that of low-inflation group

because the former experiences much higher inflation after the first period

than the latter does while they see similar magnitudes of currency

depreciation As a result the high-inflation group has more room for mercantile

advantage over the low-inflation group thereby reaping higher rises in the

current account

On the basis of the welfare measures we used in the previous exercise the

output loss of the high-inflation group is larger than that of low-inflation group

Upon tighter US monetary policy the high-inflation group would have more

Table 1 Divergent Impacts of Global and Domestic Monetary Policy Shocks on EME Groups

All High Inflation(H) Low Inflation(L) Difference(H-L)

Global Liquidity Real GDP -049 -069 -026 -043

CPI -002 061 -001 062

Current Account 044 067 036 031

Exchange Rates -033 -042 -039 -003

Overnight Call Rates 005 017 006 012

Foreign Reserves -060 -182 -029 -154

Domestic Liquidity Real GDP -016 -017 -021 004

CPI -026 -013 -062 049

Current Account 033 024 074 -050

Exchange Rates 015 010 033 -023

Foreign Reserves 046 -012 188 -200

Notes The table summarizes impulse responses of EMEs to a one-percent-point increase in the US (global) policy rate and in (domestic) policy rates of EMEs Real GDP and CPI represent cumulative responses of output growth and CPI inflation in percentage points respectively to the corresponding shock Current Account and Foreign Reserves represent cummulative responses of account balance and foreign reserves respectively (both as percentages of nominal GDP) for three years to the corresponding shock Exchange Rate and Overnight Call Rate are measured by the largest response to the corresponding shock during the first 3 years both being in percentage points


diverse price responses with higher inflation than the low-inflation one would

as implied by the perspective of New Keynesian sticky price models All of the

welfare-relevant measures indicate that the high-inflation group fares much

worse than the low-inflation group

3 Counterfactual exercise mimicking low-inflation economies

Broadly speaking the divergent responses of the two EME groups are

attributable to EMEsrsquo differential reactions upon the arrival of the shock and

their absorbing processes afterwards What could be the possible causes of such

Figure 6 Counterfactual Exercise of High-inflation EMEs Taking the Shock-absorbing Process of Low-inflation EMEs

Notes The figure summarizes a counterfactual exercise by which the high-inflation group takes the shock-absorbing process of the low-inflation group in terms of the dynamic structure of lagged endogenous variables Shaded areas around the solid lines mark the confidence bands between 16 and 84 of the high-inflation group The unit of the y-axis is percentage points


divergent responses We attempt to determine whether the distinction comes

from the reaction on the immediate responses of EMEs as expressed in the

matrix Brsquos in equation (2) or the shock-absorbing domestic structure as

expressed in the matrix Arsquos

We employ a method used by Stock and Watson (2003) specifically

replacing the estimate of A in equation (2) of the high-inflation group with the

corresponding estimate of the low-inflation group The counterfactual and

original responses of the high-inflation group are collated in Figure 6 The

dashed line of each panel shows how the high-inflation group would absorb the

shock if they had domestic economic structures resembling those of the

low-inflation group Note that a global liquidity shock may have diverse initial

impacts on the two groups which are implied by the estimate of B in equation

(2) Choi et al (2014) offer a counterfactual exercise to analyze how alternative

policy responses to the arrival of the global liquidity shock affect economic

outcomes

As shown in Figure 6 gains to the high-inflation group from mimicking the

low-inflation group dynamics are limited to lower capital outflows foreign

reserve drains and inflation along with reduced currency depreciation The

absence of gains in buffering output loss against the shock implies that improving

immediate policy responses and other forefront responses for example through

beefing up resilience of the financial sector would be of the first order

importance in curbing the loss from the shock

It is noteworthy that policymakers in high-inflation groups would not change

their policy rate reactions much over time even if they were to have the same

economic structure as the low-inflation group as implied by the comparison

between Figures 5 and 6 Improvement in inflation responses despite a

marginal deterioration in output growth may nonetheless somewhat warrant

arguing that the adoption of the domestic economic structure of the

low-inflation group would improve the welfare of the high-inflation group if the

weight on inflation is high enough in their welfare metrics8)


Ⅴ Conclusions

This paper investigates the impacts of US and domestic monetary policy on

EMEs and attempts to link the driver of divergent responses to fundamentals

US monetary tightening by a one-percentage-point increase in the federal

funds rate reduces the output growth of EMEs on average by a half percentage

point Among EME capital markets bond markets are expected to be most

significantly affected by US monetary policy In addition EMEs show

divergent policy responses and their macro-financial responses differ

depending upon their economic fundamentals in the face of tighter US policy

In particular we find that high-inflation than low-inflation EMEs are more

susceptible to the shock stemming from a US federal funds rate hike

8) Apart from welfare gains from the improved responses of capital inflows and exchange rates the gain from moderate inflation may outweigh the loss from output growth Of course this argument depends on the weights placed on inflation and output gap in the loss function For an open economy the relative weights between output gap and inflation are same as those of a closed economy as in Woodford (2003) although inflation in the loss function usually stands for inflation of domestic goods (see Corsetti 2010) A typical calibration of parameters results in a low weight placed on the output gap Even if we use a higher weight on the output gap as argued by Debortoli et al (2015) the counterfactual outcome is still preferable to the original outcome


References

Adolfson M S Laseacuteen J Lindeacute and M Villani (2007) ldquoBayesian Estimation of an Open Economy DSGE Model with Incomplete Pass-throughrdquo Journal of International Economics Vol 72(2) pp 481-511

Adolfson M S Laseacuteen J Lindeacute and M Villani (2008) ldquoEvaluating an Estimated New Keynesian Small Open Economy Modelrdquo Journal of

Economic Dynamics and Control Vol 32(8) pp 2690-2721

Alberola E A Erce and J M Serena (2014) ldquoInternational Reserves and Gross Capital Flows Dynamicsrdquo Fondo Latinoamericano de Reservas Discussion Paper No 3

Broner F T Didier A Erce and S L Schmukler (2013) ldquoGross Capital Flows Dynamics and Crisesrdquo Journal of Monetary Economics Vol 60(1) pp 113-133

Canova F (2005) ldquoThe Transmission of US Shocks to Latin Americardquo Journal of Applied Econometrics Vol 20(2) pp 229-251

Choi W G T Kang G-Y Kim and B Lee (2014) ldquoGlobal Liquidity Momenta and EMEsrsquo Policy Responsesrdquo BOK Working Paper No 2014-38

Christiano L J M Eichenbaum and C L Evans (1999) ldquoChapter 2 Monetary Policy Shocks What Have We Learned and to What Endrdquo Handbook of Macroeconomics Elsevier Vol 1 Part A pp 65-148

Christiano L J M Eichenbaum and C L Evans (2005) ldquoNominal Rigidities and the Dynamic Effects of a Shock to Monetary Policyrdquo Journal of Political Economy Vol 113(1) pp 1ndash45

Coibion O (2011) ldquoAre the Effects of Monetary Policy Shocks Big or Smallrdquo Discussion Paper National Bureau of Economic Research

Corsetti G L Dedola and S Leduc (2010) ldquoOptimal Monetary Policy in Open Economiesrdquo Handbook of Monetary Economics B M Friedman and M Woodford (eds) Elsevier Vol 3 Chap 16 pp 861-933


Debortoli D J Kim J Lindeacute and R Nunes (2015) ldquoDesigning a Simple Loss Function for the Fed Does the Dual Mandate Make Senserdquo CEPR Discussion Paper No DP10409

Dees S M Pesaran L V Smith and R Smith (2010) ldquoSupply Demand and Monetary Policy Shocks in a Multi-country New Keynesian Modelrdquo European Central Bank Working Papers No 1239

Farhi E and I Werning (2014) ldquoDilemma Not Trilemma amp Quest Capital Controls and Exchange Rates with Volatile Capital Flowsrdquo IMF Economic Review Vol 62(4) pp 569-605

Edwards S (2010) ldquoThe International Transmission of Interest Rate Shocks The Federal Reserve and Emerging Markets in Latin America and Asiardquo Journal of International Money and Finance Vol 29(4) pp 685-703

Edwards S (2015) ldquoMonetary Policy lsquoContagionrsquo in the Pacific A Historical Inquiryrdquo Presented at the Federal Reserve Bank of San Francisco Asia Economic Policy Conference

Eichengreen B (2002) ldquoCan Emerging Markets Float Should They Target Inflationrdquo Banco Central Do Brasil Working Paper Series No 36

Fraga A I Goldfajn and A Minella (2004) ldquoInflation Targeting in Emerging Market Economiesrdquo NBER Macroeconomics Annual 2003 The MIT Press Vol 18 pp 365-416

Frankel J S L Schmuklier and L Serven (2004) ldquoGlobal Transmission of Interest Rates Monetary Independence and Currency Regimerdquo Journal of International Money and Finance Vol 23(5) pp 701-733

Hannan E J and B G Quinn (1979) ldquoThe Determination of the Order of an Autoregressionrdquo Journal of the Royal Statistical Society Series B (Methodological) Vol 41(2) pp 190-195

IMF (2013) ldquoWorld Economic Outlookrdquo Washington International Monetary Fund Chap 3


Kahn B (2009) ldquoChallenges of Inflation Targeting for Emerging-market Economies The South African Caserdquo Challenges for Monetary Policy-makers in Emerging Markets No 123

Kim S and D Y Yang (2009) ldquoInternational Monetary Transmission and Exchange Rate Regimes Floaters vs Non-floatersrdquo Discussion Paper

ADBI Working Paper Series No 181

Kim S and H S Shin (2015) ldquoOffshore EME Bond Issuance and the Transmission Channels of Global Liquidityrdquo mimeo

Lubik T and F Schorfheide (2006) ldquoA Bayesian Look at the New Open Economy Macroeconomicsrdquo NBER Macroeconomics Annual 2005 The MIT Press Vol 20 pp 313-382

Lustig H and A Verdelhan (2007) ldquoThe Cross Section of Foreign Currency Risk Premia and Consumption Growth Riskrdquo The American Economic Review Vol 97(1) pp 89-117

Miniane J and J H Rogers (2007) ldquoCapital Controls and the International Transmission of US Money Shocksrdquo Journal of Money Credit and Banking Vol 39(5) pp 1003-1035

Morgan P (2011) ldquoImpact of US Quantitative Easing Policy on Emerging Asiardquo ADBI Working Paper Series No 321

Rey H (2015) ldquoDilemma Not Trilemma the Global Financial Cycle and Monetary Policy independencerdquo National Bureau of Economic Research No w21162

Romer C D and D H Romer (2004) ldquoA New Measure of Monetary Shocks Derivation and Implicationsrdquo The American Economic Review Vol 94(4) pp 1055-1084

Stock J H and M W Watson (2003) ldquoHas the Business Cycle Changed and Whyrdquo NBER Macroeconomics Annual 2002 The MIT press Vol 17 pp 159-230


Stock J H and M W Watson (2005) ldquoImplications of Dynamic Factor Models for VAR Analysisrdquo National Bureau of Economic Research No w11467

Valente G (2009) ldquoInternational Interest Rates and US Monetary Policy Announcements Evidence from Hong Kong and Singaporerdquo Journal of International Money and Finance Vol 28(6) pp 920-940

Woodford M (2003) Interest and Prices Princeton University Press


Appendix

Figure A1 Fundamentals of Emerging Markets and Real GDP Growth and CPI inflation after US Monetary Tightening

Notes The figure depicts the comprehensive set for Figure 4 with respect to real GDP growth and CPI inflation


Figure A2 Fundamentals of Emerging Markets and Nominal Appreciation and Capital Inflows after US Monetary Tightening

Notes The figure depicts the comprehensive set for Figure 4 with respect to nominal exchange rate appreciation (NEER) and capital inflows (CF)

ltAbstract in Koreangt

해외 및 국내 통화정책 충격이 신흥시장국에 미치는 영향

최운규 이병주 강태수 김근영

본 연구는 미국 및 신흥 시장국의 긴축적 통화정책이 신흥국 경제에 미

치는 영향을 실증모형을 이용하여 분석하였다 주요 추정결과는 다음과 같

다 먼저 미국의 정책금리 인상 충격이 신흥시장국의 금리 인상에 비해 신

흥국 경제성장에 더 큰 영향을 주는 것으로 나타났다 또한 미국의 금리인

상 충격은 신흥국의 경제성장률 및 물가상승률에 유의한 영향을 미치는 가

운데 신흥국의 정책반응과 거시변수에 미치는 영향은 신흥국의 거시여건

에 따라 다르게 나타났다 특히 물가상승률이 높은 신흥국일수록 미국의 긴

축정책에 따른 성장률 위축의 여파가 큰 것으로 나타났다

핵심 주제어 글로벌 유동성 금융 전이 통화정책 충격 신흥시장국


국제통화기금

한국은행 경제연구원 국제경제연구실 부연구위원 전화

한국은행 조사국 산업고용팀 차장 전화

한국은행 조사국 국제종합팀 팀장 전화

이 연구내용은 집필자 개인의견이며 한국은행의 공식견해와는 무관합니다 따라서 본 논문의 내용을 보

도하거나 인용할 경우에는 집필자명을 반드시 명시하여 주시기 바랍니다

BOK 경제연구 발간목록한국은행 경제연구원에서는 Working Paper인 『BOK 경제연구』를 수시로 발간하고 있습니다

985172BOK 경제연구』는 주요 경제 현상 및 정책 효과에 대한 직관적 설명 뿐 아니라 깊이 있는 이론 또는 실증 분석을 제공함으로써 엄밀한 논증에 초점을 두는 학술논문 형태의 연구이며

한국은행 직원 및 한국은행 연구용역사업의 연구 결과물이 수록되고 있습니다

985172BOK 경제연구』는 한국은행 경제연구원 홈페이지(httpimerbokorkr)에서 다운로드하여 보실 수 있습니다

제2014 -1 Network Indicators for Monitoring Intraday Liquidity in BOK-Wire+

Seungjin BaeksdotKimmo Soram kisdotJaeho Yoon

2 중소기업에 대한 신용정책 효과 정호성sdot임호성

3 경제충격 효과의 산업간 공행성 분석 황선웅sdot민성환sdot신동현sdot김기호

4 서비스업 발전을 통한 내외수 균형성장 기대효과 및 리스크

김승원sdot황광명

5 Cross-country-heterogeneous and Time-varying Effects of Unconventional Monetary Policies in AEs on Portfolio Inflows to EMEs

Kyoungsoo YoonsdotChristophe Hurlin

6 인터넷뱅킹 결제성예금 및 은행 수익성과의 관계 분석

이동규sdot전봉걸

7 Dissecting Foreign Bank Lending Behavior During the 2008-2009 Crisis

Moon Jung ChoisdotEva GutierrezsdotMaria Soledad Martinez Peria

8 The Impact of Foreign Banks on Monetary Policy Transmission during the Global Financial Crisis of 2008-2009 Evidence from Korea

Bang Nam JeonsdotHosung LimsdotJi Wu

9 Welfare Cost of Business Cycles in Economies with Individual Consumption Risk

Martin EllisonsdotThomas J Sargent

10 Investor Trading Behavior Around the Time of Geopolitical Risk Events Evidence from South Korea

Young Han KimsdotHosung Jung

11 Imported-Inputs Channel of Exchange Rate Pass-Through Evidence from Korean Firm-Level Pricing Survey

Jae Bin AhnsdotChang-Gui Park

제2014 -12 비대칭 금리기간구조에 대한 실증분석 김기호

13 The Effects of Globalization on Macroeconomic Dynamics in a Trade-Dependent Economythe Case of Korea

Fabio MilanisdotSung Ho Park

14 국제 포트폴리오투자 행태 분석 채권-주식 투자자금간 상호관계를 중심으로

이주용sdot김근영

15 북한 경제의 추격 성장 가능성과 정책 선택 시나리오

이근sdot최지영

16 Mapping Koreas International Linkages using Generalised Connectedness Measures

Hail ParksdotYongcheol Shin

17 국제자본이동 하에서 환율신축성과 경상수지 조정 국가패널 분석

김근영

18 외국인 투자자가 외환시장과 주식시장 간 유동성 동행화에 미치는 영향

김준한sdot이지은

19 Forecasting the Term Structure of Government Bond Yields Using Credit Spreads and Structural Breaks

Azamat AbdymomunovsdotKyu Ho KangsdotKi Jeong Kim

20 Impact of Demographic Change upon the Sustainability of Fiscal Policy

Younggak KimsdotMyoung Chul KimsdotSeongyong Im

21 The Impact of Population Aging on the Countercyclical Fiscal Stance in Korea with a Focus on the Automatic Stabilizer

Tae-Jeong KimsdotMihye LeesdotRobert Dekle

22 미 연준과 유럽중앙은행의 비전통적 통화정책 수행원칙에 관한 고찰

김병기sdot김진일

23 우리나라 일반인의 인플레이션 기대 형성 행태 분석

이한규sdot최진호

제2014 -24 Nonlinearity in Nexus between Working Hours and Productivity

Dongyeol LeesdotHyunjoon Lim

25 Strategies for Reforming Koreas Labor Market to Foster Growth

Mai Dao Davide FurcerisdotJisoo HwangsdotMeeyeon KimsdotTae-Jeong Kim

26 글로벌 금융위기 이후 성장잠재력 확충 2014 한국은행 국제컨퍼런스 결과보고서

한국은행 경제연구원

27 인구구조 변화가 경제성장률에 미치는 영향 자본이동의 역할에 대한 논의를 중심으로

손종칠

28 Safe Assets Robert J Barro

29 확장된 실업지표를 이용한 우리나라 노동시장에서의 이력현상 분석

김현학sdot황광명

30 Entropy of Global Financial Linkages Daeyup Lee

31 International Currencies Past Present and Future Two Views from Economic History

Barry Eichengreen

32 금융체제 이행 및 통합 사례남북한 금융통합에 대한 시사점

김병연

33 Measuring Price-Level Uncertainty and Instability in the US 1850-2012

Timothy CogleysdotThomas J Sargent

34 고용보호제도가 노동시장 이원화 및 노동생산성에 미치는 영향

김승원

35 해외충격시 외화예금의 역할 주요 신흥국 신용스프레드에 미치는 영향을 중심으로

정호성sdot우준명

36 실업률을 고려한 최적 통화정책 분석 김인수sdot이명수

37 우리나라 무역거래의 결제통화 결정요인 분석 황광명sdot김경민sdot노충식sdot김미진

38 Global Liquidity Transmission to Emerging Market Economies and Their Policy Responses

Woon Gyu ChoisdotTaesu KangsdotGeun-Young KimsdotByongju Lee

제2015 -1 글로벌 금융위기 이후 주요국 통화정책 운영체계의 변화

김병기sdot김인수

2 미국 장기시장금리 변동이 우리나라 금리기간구조에 미치는 영향 분석 및 정책적 시사점

강규호sdot오형석

3 직간접 무역연계성을 통한 해외충격의 우리나라 수출입 파급효과 분석

최문정sdot김근영

4 통화정책 효과의 지역적 차이 김기호

5 수입중간재의 비용효과를 고려한 환율변동과 수출가격 간의 관계

김경민

6 중앙은행의 정책금리 발표가 주식시장 유동성에 미치는 영향

이지은

7 은행 건전성지표의 변동요인과 거시건전성 규제의 영향

강종구

8 Price Discovery and Foreign Participation in The Republic of Koreas Government Bond Futures and Cash Markets

Jaehun ChoisdotHosung LimsdotRogelio Jr MercadosdotCyn-Young Park

9 규제가 노동생산성에 미치는 영향 한국의 산업패널 자료를 이용한 실증분석

이동렬sdot최종일sdot이종한

10 인구 고령화와 정년연장 연구(세대 간 중첩모형(OLG)을 이용한 정량 분석)

홍재화sdot강태수

11 예측조합 및 밀도함수에 의한 소비자물가 상승률 전망

김현학

12 인플레이션 동학과 통화정책 우준명

13 Failure Risk and the Cross-Section of Hedge Fund Returns

Jung-Min Kim

14 Global Liquidity and Commodity Prices Hyunju KangsdotBok-Keun YusdotJongmin Yu

15 Foreign Ownership Legal System and Stock Market Liquidity

Jieun LeesdotKee H Chung

제2015 -16 바젤Ⅲ 은행 경기대응완충자본 규제의 기준지표에 대한 연구

서현덕sdot이정연

17 우리나라 대출 수요와 공급의 변동요인 분석 강종구sdot임호성

18 북한 인구구조의 변화 추이와 시사점 최지영

19 Entry of Non-financial Firms and Competition in the Retail Payments Market

Jooyong Jun

20 Monetary Policy Regime Change and Regional Inflation Dynamics Looking through the Lens of Sector-Level Data for Korea

Chi-Young ChoisdotJoo Yong LeesdotRoisin OSullivan

21 Costs of Foreign Capital Flows in Emerging Market Economies Unexpected Economic Growth and Increased Financial Market Volatility

Kyoungsoo YoonsdotJayoung Kim

22 글로벌 금리 정상화와 통화정책 과제 2015년 한국은행 국제컨퍼런스 결과보고서


23 The Effects of Global Liquidity on Global Imbalances

Marie-Louise DJIGBENOU-KREsdotHail Park

24 실물경기를 고려한 내재 유동성 측정 우준명sdot이지은

25 Deflation and Monetary Policy Barry Eichengreen

26 Macroeconomic Shocks and Dynamics of Labor Markets in Korea

Tae Bong KimsdotHangyu Lee

27 Reference Rates and Monetary Policy Effectiveness in Korea

Heung Soon JungsdotDong Jin LeesdotTae Hyo GwonsdotSe Jin Yun

28 Energy Efficiency and Firm Growth Bongseok ChoisdotWooyoung ParksdotBok-Keun Yu

29 An Analysis of Trade Patterns in East Asia and the Effects of the Real Exchange Rate Movements

Moon Jung ChoisdotGeun-Young KimsdotJoo Yong Lee

30 Forecasting Financial Stress Indices in Korea A Factor Model Approach

Hyeongwoo KimsdotHyun Hak KimsdotWen Shi

제2016 -1 The Spillover Effects of US Monetary Policy on Emerging Market Economies Breaks Asymmetries and Fundamentals

Geun-Young KimsdotHail ParksdotPeter Tillmann

2 Pass-Through of Imported Input Prices to Domestic Producer Prices Evidence from Sector-Level Data

JaeBin AhnsdotChang-Gui ParksdotChanho Park

3 Spillovers from US Unconventional Monetary Policy and Its Normalization to Emerging Markets A Capital Flow Perspective

Sangwon SuhsdotByung-Soo Koo

4 Stock Returns and Mutual Fund Flows in the Korean Financial Market A System Approach

Jaebeom Kimsdot Jung-Min Kim

5 정책금리 변동이 성별 세대별 고용률에 미치는 영향

정성엽

6 From Firm-level Imports to Aggregate Productivity Evidence from Korean Manufacturing Firms Data

JaeBin AhnsdotMoon Jung Choi

7 자유무역협정(FTA)이 한국 기업의 기업내 무역에 미친 효과

전봉걸sdot김은숙sdot이주용

8 The Relation Between Monetary and Macroprudential Policy

Jong Ku Kang

9 조세피난처 투자자가 투자 기업 및 주식시장에 미치는 영향

정호성sdot김순호

10 주택실거래 자료를 이용한 주택부문 거시건전성 정책 효과 분석

정호성sdot이지은

11 Does Intra-Regional Trade Matter in Regional Stock Markets New Evidence from Asia-Pacific Region

Sei-Wan KimsdotMoon Jung Choi

12 Liability Information and Anti-fraud Investment in a Layered Retail Payment Structure

Kyoung-Soo YoonsdotJooyong Jun

13 Testing the Labor Market Dualism in Korea

Sungyup ChungsdotSunyoung Jung

14 북한 이중경제 사회계정행렬 추정을 통한 비공식부문 분석

최지영

제2016 -15 Divergent EME Responses to Global and Domestic Monetary Policy Shocks

Woon Gyu ChoisdotByongju Leesdot Taesu KangsdotGeun-Young Kim

Contents

Ⅰ Introduction middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot1

Ⅱ Empirical Model middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot2

Ⅲ EME Responses to US and Domestic Monetary

Tightening middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot 5


middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot12

Ⅴ Conclusions middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot21

References middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot22

Appendix middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot26






Ⅰ Introduction






EMEs











EME panel data























robust counterparts
















Ⅱ Empirical Model














(1)






(2)

(3)








Thailand and Turkey




















= prime

prime (4)




primeprime (6)























































with ours






























































































currency pricing



















































































the above issues
























































tightening


































current account







CPI -002 061 -001 062


Exchange Rates -033 -042 -039 -003




CPI -026 -013 -062 049































outcomes

















Ⅴ Conclusions













References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영








Ⅰ Introduction






EMEs











EME panel data























robust counterparts
















Ⅱ Empirical Model














(1)






(2)

(3)








Thailand and Turkey




















= prime

prime (4)




primeprime (6)























































with ours






























































































currency pricing



















































































the above issues
























































tightening


































current account







CPI -002 061 -001 062


Exchange Rates -033 -042 -039 -003




CPI -026 -013 -062 049































outcomes

















Ⅴ Conclusions













References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영












robust counterparts
















Ⅱ Empirical Model














(1)






(2)

(3)








Thailand and Turkey




















= prime

prime (4)




primeprime (6)























































with ours






























































































currency pricing



















































































the above issues
























































tightening


































current account







CPI -002 061 -001 062


Exchange Rates -033 -042 -039 -003




CPI -026 -013 -062 049































outcomes

















Ⅴ Conclusions













References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영












(1)






(2)

(3)








Thailand and Turkey




















= prime

prime (4)




primeprime (6)























































with ours






























































































currency pricing



















































































the above issues
























































tightening


































current account







CPI -002 061 -001 062


Exchange Rates -033 -042 -039 -003




CPI -026 -013 -062 049































outcomes

















Ⅴ Conclusions













References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영



















= prime

prime (4)




primeprime (6)























































with ours






























































































currency pricing



















































































the above issues
























































tightening


































current account







CPI -002 061 -001 062


Exchange Rates -033 -042 -039 -003




CPI -026 -013 -062 049































outcomes

















Ⅴ Conclusions













References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영


















































with ours






























































































currency pricing



















































































the above issues
























































tightening


































current account







CPI -002 061 -001 062


Exchange Rates -033 -042 -039 -003




CPI -026 -013 -062 049































outcomes

















Ⅴ Conclusions













References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영



































































currency pricing



















































































the above issues
























































tightening


































current account







CPI -002 061 -001 062


Exchange Rates -033 -042 -039 -003




CPI -026 -013 -062 049































outcomes

















Ⅴ Conclusions













References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영










































































the above issues
























































tightening


































current account







CPI -002 061 -001 062


Exchange Rates -033 -042 -039 -003




CPI -026 -013 -062 049































outcomes

















Ⅴ Conclusions













References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영

















































tightening


































current account







CPI -002 061 -001 062


Exchange Rates -033 -042 -039 -003




CPI -026 -013 -062 049































outcomes

















Ⅴ Conclusions













References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영

























current account







CPI -002 061 -001 062


Exchange Rates -033 -042 -039 -003




CPI -026 -013 -062 049































outcomes

















Ⅴ Conclusions













References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영





























outcomes

















Ⅴ Conclusions













References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영




Ⅴ Conclusions













References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영




References








































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영































Appendix



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영



















국제통화기금




































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영

































이근sdot최지영




김근영




















손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영










손종칠






Barry Eichengreen


김병연




김승원















김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영











김경민


이지은


강종구








김현학



Jung-Min Kim









Jooyong Jun





























정성엽






Jong Ku Kang












최지영








Jooyong Jun





























정성엽






Jong Ku Kang












최지영












정성엽






Jong Ku Kang












최지영



divergent eme responses to global and domestic monetary...

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